Taiwan Semiconductor Manufacturing Q4 Earnings Call Highlights

Core Insights - Taiwan Semiconductor Manufacturing Company (TSMC) reported strong fourth-quarter results driven by robust demand for advanced process technologies, particularly in AI-related applications [3][16] - The company outlined a significant investment plan for 2026, with capital expenditures expected to rise to $52–56 billion, focusing on advanced process technologies [5][14] Financial Performance - Fourth-quarter revenue increased by 5.7% sequentially in New Taiwan dollars and 1.9% in U.S. dollars to $33.7 billion, slightly exceeding prior guidance [2][6] - Gross margin improved by 2.8 percentage points to 62.3%, while operating margin rose by 3.4 percentage points to 54% [1][2] - Earnings per share (EPS) for the fourth quarter was TWD 19.5, with a return on equity of 38.8% [1] Market Segmentation - Advanced nodes (3nm, 5nm, and 7nm) accounted for 77% of wafer revenue in 2025, with high-performance computing (HPC) contributing 55% of fourth-quarter revenue [4][7] - AI accelerator revenue is projected to grow at a mid- to high-50s% CAGR through 2029, indicating strong future demand [4][16] Future Guidance - For Q1 2026, TSMC expects revenue between $34.6 billion and $35.8 billion, implying approximately 4% sequential growth and 38% year-over-year growth at the midpoint [5][12] - The company anticipates near-30% full-year revenue growth for 2026, with gross margins projected between 63% and 65% [5][12] Capital Expenditure and Investment - TSMC plans to allocate 70–80% of its 2026 capital expenditures to advanced process technologies, with additional investments in specialty technologies and advanced packaging [14][15] - The company is also ramping up production capabilities, with N2 entering high-volume production and plans for N2P/A16 in 2026 [4][19] Operational Updates - TSMC's cash and marketable securities totaled TWD 3.1 trillion (approximately $98 billion) at the end of the fourth quarter, with strong cash flow generation of TWD 726 billion [6][9] - The company is expanding its manufacturing footprint, with new fabs in Arizona and Japan, and ongoing construction in Germany [17][18]